CTA Case No. 5547 (Decision)

... REPUBLIC OF THE PHILIPPINES COURT OFTAX APPEALS QUEZON CITY EQUITABLE BANKING CORPORATION, Petitioner, -versus- C.T.A. CASE NO. 5547 ~~-~~~~: -~e~~~~d-e~: -~~~ -~ )~~~ J!li COMMISSIONER OF INTERNAL _________ _____ Promulgated: __________ _! DECISION This is a petition seeking for the refund or issuance of a tax credit certificate in the amount ofP1 ,445 ,561.50 allegedly representing overpaid gross receipts taxes for the second quarter of 1995. Petitioner is a banking corporation duly organized and existing under the laws of the Philippines with principal office at 262 Juan Luna St. Binondo, Manila. On July 20, 1995, Petitioner filed its various Quarterly Percentage Tax Returns, covering those of its Head Office and branches, for the quarter ended Jtme 30, 1995 and submitted its "Transmittal Sheet of Percentage Tax of the Head Office and Branches/Units of Large Taxpayers for the Quarter ended June 30, 1995" showing a total percentage tax due ofP35 ,191,939.32 (Exh. A). This amount was likewise paid by Petitioner to the Bureau of Internal Revenue (BIR) on the same day (Exhs. A-8 and A- 9) .

DECISION C.T.A. CASE NO . 5547 Page 2 Of the said amount ofP35,191,939.32, the total amount of gross receipts tax paid by Petitioner' s Head Office (Exh. A-1) as well as its Arranque (Exh. A-2), Magdalena (Exh. A-3), Ongpin (Exh. A-4), Reina Regente (Exh. A-5) , and Soler (Exh. A-6) Branches, totalling P19,072,791 .83 , which amount was reflected in Petitioner's Quarterly Percentage Tax Return for the quarter ended June 30, 1995 (Exh. B). On September 26, 1996, on the strength of this Court' s decision in CTA Case No. 4720 entitled Asian Bank Corporation vs. Commissioner of Internal Revenue promulgated last January 30, 1996, where We held that the twenty percent (20%) final withholding tax on bank's passive income should not form part of the bank's taxable gross receipts for the purpose of computing Gross Receipts Tax, Petitioner filed a claim for refund with the Bureau of Internal Revenue in the amount of P1 ,445 ,561.50 pertaining to the quarter ended June 30, 1995 computed as follows: Gross Receipts Subjected to Tax p 405 ,696,081 .99 Less: 20% Portion of Tax Paid Income 3,061 ,445.61 Investment Income subject to 20% final tax 25,849,784.36 booked at gross p 376.784.852.02 Adjusted Gross Receipts Tax base Computation of Adjusted Gross Receipts Tax: Gross Receipts Tax Due 0% p 12,852,985.56 p 0.00 1% 3,771,745.37 3% 19,924,658.88 37,717.45 5% 340,235,462.21 597,739.77 17,011,773.11 P376 ,784 ,852.02 P17 ,647 ,230 .33 Gross Receipts Tax Paid p 19,092,791.83 Adjusted Gross Receipts Tax 17,647,230.33 Tax Refund p 1.445.561.50

DECISION C.T.A. CASE NO . 5547 Page 3 Petitioner' s claim was likewise premised on the principle that no one shall unjustly enrich himself at the expense of another and on Section 230 of the National Internal Revenue Code which allows for recovery of any national internal revenue tax erroneously and illegally collected by the BIR. As there was no action on the part of herein Respondent, the instant Petition was filed on July 18, 1997 to toll the running of the two year prescriptive period. In his Answer, Respondent raised the following Special and Affirmative Defenses: XXX 11. The decision in Asian Bank Corporation vs. Commissioner of Internal Revenue (CTA Case No. 4720) is pending appeal with the Court of Appeals. Hence, invocation thereof at this point in time is premature. 12. Revenue Regulations No. 13-80 dated November 7, 1980 governs the taxation of minerals and mineral products and, therefore, it is irrelevant to this case since petitioner is a banking institution. 13. The petition does not state a cause of action as there is no allegation that the tax sought to be refunded was actually paid to the Bureau of Internal Revenue in accordance with the provisions ofthe Tax Code. 14. The claim for refund is pending administrative investigation. 15 . Taxes are presumed to have been collected in accordance with law. Hence, petitioner must prove that the taxes sought to be refunded were erroneously or illegally collected. 16. Petitioner must show that it has complied with the provisions of Section 204(3) and 230 of the Tax Code. 17. Claims for refund of taxes are construed strictly against claimants, the same being in the nature of an exemption from taxation (Manila Electric Co. vs. Commissioner oflnternal Revenue, 67 SCRA 351).

DECISION C.T.A. CASE NO. 5547 Page 4 This case was originally submitted for decision on August 4, 1998. However, Petitioner filed a "Motion to Reopen Case and Allow EBC to Present Additional Evidence." In its Motion, Petitioner cited CTA Case Nos. 5146 and 5411, both entitled Equitable Banking Corporation versus The Commissioner of Internal Revenue and decided on August 8, 1998 and June 15, 1998, respectively. Both cases were decided against the Petitioner mainly due to insufficiency of evidence. Petitioner, therefore, sought this Court' s consideration that it be allowed to present additional evidence to fully establish its claim. On January 5, 1999, this Comi denied Petitioner's motion, thus: "The presentation of additional evidence is allowed only when it is newly discovered, or where it has been omitted through inadvertence or mistake, or where the purpose of the evidence is to correct evidence previously offered. In addition, the Court, for good reasons, in the furtherance of justice, may permit them to offer evidence upon their original case, and its ruling will not be disturbed in the appellate court where no abuse of discretion appears. It appears that the reason of petitioner for wanting to reopen this case is based solely in our decision in the cases of Equitable Banking Corporation vs. Comm. Of Internal Revenue, CTA Case Nos. 5411 and 5146. Petitioner failed to specifically state the facts surrounding the alleged inadvertence or mistake or excusable negligence in the presentation of that alleged additional docwnent except for the fact that it was raised in our previous decisions involving the same parties and subject matter. The Court cannot allow the presentation of piece-meal evidence, otherwise, there will be no end to litigation. (Citations deleted.)" A Motion for Reconsideration was filed by Petitioner but was likewise denied by the Court on April 30, 1999 for its failure to state the subject of the additional evidence to be presented and the purpose for the same will be offered.

DECISION C.T.A. CASE NO. 5547 Page 6 "Revenue Regulations No. 12-80 dated November 7, 1980 on Taxation of Certain Income Derived from Banking Activities provides that the rates of tax to be imposed on the gross receipts of such financial institution; shall be based on all items of income actually received, thus: SEC. 4. X X X X X X X X X (e) Gross receipts tax on banks, non-bank financial intermediaries, financing companies and other non-bank financial intermediaries not performing quasi-banking activities.-The rates oftaxes to be imposed on the gross receipts of such financial institutions shall be based on all items of income actually received. Mere accrual shall not be considered, but once payment is received on such accrual or in cases of prepayment, then the amount actually received shall be included in the tax base of such financial institutions, as provided hereunder. (Underscoring supplied) From the foregoing, it is but logical to infer that the final tax, not having been received by the petitioner but instead went to the coffers of the government, should no longer form part of its gross recipts for the purpose of computing the GRT. This conclusion is in accord with the interpretation of the Supreme Court in the case entitled Collector of Internal Revenue vs. Manila Jockey Club, 108 Phil. 821 , as quoted by this Court in disposing of a similar issue in the case entitled Compania Maritima vs. Acting Commissioner of Internal Revenue, CTA Case No. 1426 dated November 14, 1966, thus: In the second place, the highest tribunal of the land interpreted the term "gross receipts" to mean all receipts of a taxpayer excluding those which have been especially earmarked by law or regulation for the government or some person other than the taxpayer. Thus, it was held : "x x x x. The Government could not have meant to tax as gross receipt of the Manila JOCKEY CLUB THE liz% which it directs same Club to turn over to the Board of Races . The latter being a Government institution, there would be double taxation, which should be avoided unless the statute admits of no other interpretation. In the same manner, the Government could not have intended to consider as gross receipt the portion of the funds which it directed the Club to give, or

DECISION C.T. A. CASE NO . 5547 Page 7 know the Club would give, to winning horses and Jockeys-admitted 5%. It is true that the law says that out ofthe total wager funds 121 /2% shall be set aside as the ' commission' of the track owners but the law itself takes official notice, and virtually approves or directs payment of the portion that goes to owners of horses as prizes and bonuses of jockeys, which portion is admittedly 5% out of the 12112% commission. As it did not at that time contemplate the application of ' gross receipts' revenue principle, the law in making a distribution of the total wager funds, took no trouble of separating one item from the other; and for convenience, grouped three items under one common denomination. "Needless to say, gross receipts of the proprietor of the amusement place should not include any money which although delivered to the amusement place has been especially earmarked by law or regulation for some person other than the proprietor." (The Commissioner of Internal Revenue vs. Manila Jockey Club, Inc. , G.R. Nos. L-13890 & L-13887, June 30, 1960) It is to be noted that, under Section 260 of the Tax Code, a race-track is subject to an amusement tax of 20% of its gross receipts and the term ' gross receipts ' embraces all the receipts of the proprietor, lessee, or operator of the amusement place." Notwithstanding the broad and all-embracing definition of the term "gross receipts" found in our amusement tax law, our Supreme Court did not adopt a literal interpretation ofthe said term in the case of the Manila Jockey Club, Inc., supra." We now proceed to the amount to second issue. Petitioner, to support its case, presented the following : Exhibits Description A EBC ' s Transmittal Sheet of Percentage Tax of the head Office and branches/UNITS of Large Taxpayers for the Quarter Ended June 30, 1995 B EBC Quarterly Percentage Tax Return for the quarter ended June 30, 1995

DEC ISION C.T.A. CASE NO. 5547 Page 8 (BIR Form No. 2529 A-Q) C Written claim for refund dated September 26, 1996 by EBC, thru its then Senior Manager Maritess B. Antonio, with supporting documents, requesting the Commissioner of Internal Revenue for refund of, or issuance of credit certificate for, among other figures, the amount of P1,445 ,561.50 for the excess GRT for the quarter ended June 30, 1995 and paid on July 20, 1995. D up toRR EBC Income & Expense Account Sub-ledger for the quarter Ended June 30, 1995 G, T and HH EBC Income Account Sub-ledger, tabulating the Income Account on Interest deposit with local banks savings for the quarter ended June 1995 with a credited balance of P8 ,791.16 Sand GG EBC Income Account Sub-ledger, tabulating the Income Account on Interest deposit with local banks savings, for the quarter ended June 1995 with a credited balance of P141 ,296.20, as shown on Exh. GG K and L EBC Income Account Sub-ledger, tabulating the Income Account on trading gain-government securities-net of final tax, for the month of April 1995 , with a credited total balance ofP1 ,521 ,428 .94, as shown on Exh. L X andY EBC Income Account Sub-ledger, tabulating the Income Account on trading gain-government securities-net of final tax, for the months of April and May 1995 , with a credited total balance ofP3 ,343 ,606.85, as shown on Exh. Y LL and MM EBC Income Account Sub-ledger, tabulating the Income Account on trading gain-government securities-net of final tax, for the months of April, May, and June 1995 , with a credited total balance ofP6,027,507.80, as shown on Exh.MM D and P EBC Income Account Sub-ledger, tabulating the Income DD Account on Interest Income on Interbank loans receivable for April 1995, with a credited total balance ofP355,833 .33 EBC Income Account Sub-ledger, tabulating the Income Account on Interest Income on Interbank loans receivable for the quarter ending June 1995, with a credited total balance ofP5,559,722.22

DECISION C.T.A. CASE NO. 5547 Page 9 RR EBC Expense Account Sub-ledger, tabulating the Expense Account on Provision for Tax-Final Tax, for Merchant Banking for the quarter ended June 1995 ; with a credited total balance ofP34,799.00 M, Zand QQ EBC Expense Account Sub-ledger, tabulating the Expense Account on Provision for Tax-Final Tax, for Corp. Overhead, for the quarter ended June 1995 ; with a credited total balance ofP304,000.00 as shown on Exh. QQ N,O, AA, BB, EBC Expense Account Sub-ledger, tabulating the Expense CC, PP, 00, Account on Provision for Tax-Final Tax, for Treasury, for the andNN quarter ended June 1995 ; with a credited total balance of P25 ,51 1,005.36 as shown on Exh. NN ss Statement of Income and Expense Accounts of EBC for Head Office for the quarter ended June 30, 1995 Respondent, on his part, presented no evidence and submitted the case for decision based on the pleadings . (p. 134, CTA Records). Petitioner, in arriving at the adjusted gross receipts tax base, deducted the amounts of P3,06 1,445 .61 representing 20% portion of tax-paid income and P25 ,849,784.36 representing investment income subject to 20% final tax booked at gross. To prove the 20% portion of tax- paid income, Petitioner submitted subsidiary ledgers with the exception of interest income on Time Loan-Asahi. EXHIBIT INTEREST EXHIBIT 20% INCOME FINAL (Net ofFT) TAX On deposits w/ local banks GG&HH 150,087.36 C-10 37,521.84 6,027,507.80 C-10 1,506 ,876 .95 Trading gains MM 5,559 ,722 .22 C-10 1,389,930.56 C-10 On interbank loans DD 127,116.26 p 3,061,445.61 On time loan-Asahi TOTAL

DECISION C.T.A. CASE NO. 5547 Page 10 The subsidiary ledgers (Exhs. K, L, X, Y, LL, MM, D, P, DD, G, S, T, GG, and HH) and the Income Statement (Exh. SS) offered by Petitioner in evidence showed that the interest income on these investments were recorded net of final withholding tax. Thus, Petitioner's computation of overpaid gross receipts tax on this tax paid income appears to be correct (Exh. C-1 0). Petitioner, however, failed to prove the fact of withholding and remittance to the BIR which may be evidenced by the corresponding Certificates of Income Tax withheld. The subsidiary ledgers alone are not conclusive evidence of payment of final tax. These are self- serving evidence which, if not substantiated by other evidence, merits very little weight. As to the amount of P25,849,784.36 allegedly representing investment income from trading accounts securities booked at gross, inclusive of the 20% final tax (Exhs. E, H, I, J, U, V, W, II, JJ, and KK), and recorded under Provision for Tax-Final Tax (Exhs. M, N, 0 , Z, AA, BB, CC, NN, 00, PP, QQ and RR), again, Petitioner's allegation that the corresponding final taxes were withheld and, therefore, should no longer form part of the gross receipts for purposes of computing the gross receipts tax , remain to be pure assertions tmsupported by any convincing evidence. "Tax refunds are in the nature of tax exemptions. As such, they are regarded as m derogation of sovereign authority and to be construed in "strictissimi juris" against the person or entity claiming the exemption. The burden of proof is upon him who claims the exemption in his favor and he must be able to justify his claim." (Citibank, N.A. vs. Court of Appeals and Commissioner of Internal Revenue, 280 SCRA 459). Therefore, for failure of the Petitioner to substantiate its claim, the same cannot be given due course. WHEREFORE, in view of all the foregoing, the instant Petition for Review is hereby DISMISSED for insufficiency of evidence.

DECISION ~w;~~ C.T.A . CASE NO. 5547 Page II RAMON O.DEV Associate Judge SO ORDERED. WE CONCUR: ~-~ - ~ ERNESTO D. ACOSTA Presiding Judge Dissent i ng AMANCIO Q. SAGA Associate Judge CERTIFICATION I hereby certify that the above decision was reached after due consultation with the members of the Court of Tax Appeals in accordance with Section 13 , Article VIII of the Constitution. ~ Q-~L ERNESTO D. ACOSTA Presiding Judge

REPUBLIC OF THE PHILIPPINES COURT OFTAX APPEALS QUEZON CITY EQUITABLE BANKING CORPORATION, Petitioner, -versus- C.T.A. CASE NO. 5547 COMMISSIONER OF INTERNAL REVENUE, Promulgated: Respondent. SEP l01999 ~ ' X----------------- ---------------------------------------- X DISSENTING OPINION The majority postulates that the twenty percent (20%) final withholding tax on a bank' s passive income should not form part of its taxable gross receipts for the purpose of computing the gross receipts tax. This is based on this Court's ruling in the case of Asian Bank Corporation vs. Commissioner of Internal Revenue, CTA Case No. 4720, January 30, 1996. I believe that this Court's ruling m the aforementioned case of Asian Bank Corporation is erroneous. There is no provision in the Tax Code or any special laws which excludes the 20% final income tax withholding under Section 50(a), as no longer forming part of the gross receipts for purpose of the 5% gross receipts tax. Section 8(c) of Revenue Regulations No. 12-80, dated November 7, 1980, as amended by Section 7(c) of Revenue Regulations No. 17-84, dated October 12, 1984 have the same provisions, thus:

DISS ENTING OPINION - CTA CASE NO. 5547 PAG E2 "If the recipient of the above-mentioned items of income are financial institutions, the same shall be included as part of the tax base upon which the gross receipts tax is imposed." Clearly, there is no doubt that the 20% final withholding tax is legally includible as part of the gross receipts for purposes of computing the gross receipts tax . The petitioner cited the case of Asian Bank Corporation vs. Commissioner of Internal Revenue, CTA Case No. 4720, dated January 30, 1996, where this Court has upheld the petitioner' s contention that the interest income included as part of such gross receipts should be computed minus the 20% final tax already withheld and deducted by various withholding agents for the reason that the amount did not go to its funds , hence, was not actually received by them. And the Court approved the petitioner' s citation of Section 4(e) of Revenue Regulations No. 12-80, dated November 7, 1980, thus: "Gross receipts tax on banks, non-bank financial intermediaries, financing companies, and other non-bank financial intermediaries not performing quasi-banking activities. - The rates of taxes to be imposed on the gross receipts of such financial institutions shall be based on all items of income actually received. Mere accrual shall not be considered, but once payment is received on such accrual or in cases of overpayment then the amount actually received shall be included in the tax base of such financial institutions, as provided hereunder." This Court concluded in said case that from the aforestated provisions it can logically be inferred that the amount representing the final tax, not having been received by the petitioner but instead went to the coffers of the government, should no longer form part of its gross receipts for purposes of computing the gross receipts tax. Such conclusion in law is legally objectionable for two (2) reasons, to wit:

DISSENTING OPINION- CTA CASE NO. 5547 PAGE 3 (1) Section 4(e) of Revenue Regulations No. 12-80 is not a computation determinative of the amount of gross receipts as basis of the gross receipts tax under Section 119 of the Tax Code. Said revenue regulations merely authorize the determination of the amount of gross receipts on the basis of the method of accounting being used by the taxpayer under Section 37 of the Tax Code. Such accounting methods for tax purposes comprise a set of rules for determining when and how to report income and deductions (Consolidated Mines, Inc. vs. CTA, L-18843 , August 29, 1974). The two principal accounting methods expressly and impliedly recognized by the Tax Code and the Income Tax Regulations are: (a) Cash receipts and disbursement method or cash basis. - Income earned by the taxpayer is not included in gross income until received and expenses are not deducted until paid within the taxable year; and (b) Accrual basis. - Income is included in gross income when earned, whether received or not, and expenses are allowed as deductions when incurred although not yet paid within the year. (2) That the non-inclusion of the 20% final withholding income tax from the gross interest income for purposes of the gross receipts tax operates as an exemption from tax. Being an exemption from tax, the same must be construed strictly not against the government but against the one who asserts the claim of exemption. Tax exemption can only be given effect when the grant is clear and categorical inasmuch as taxation is the rule and exemption is the exception, Section 26, Tax Code. The holding therefore in the Asian Bank Corporation to the effect that the non-inclusion of the 20% final withholding income tax from the gross receipts can logically be inferred from the wordings of said Section 4(e) of Revenue Regulations No. 12-80, is misplaced. Tax statutes are to receive a reasonable construction with a view to carrying out their purpose and intent (51 Am Jur 361). It should not be construed as to permit the taxpayer to easily evade the payment of the tax (Cabon Steel Co. vs. Lewelyn, 251 U.S. 501). Thus, the good faith of the taxpayer is not sufficient justification for exemption from the payment of surcharges imposed by law (Commissioner vs. Royal Interocean Lines and CTA, L-26506, July 30, 1970). A tax statute should be construed to avoid the possibilities oftax evasion (Lorenzo vs. Posadas, 64 Phils. 353).

DISSENTING OPINION - CTA CASE NO. 5547 PAGE 4 The High Court' s decision in the case of Commissioner of Internal Revenue vs. The Manila Jockey Club, Inc., 108 Phils. 821, June 30, 1960, which was reaffirmed by the said Court in the case of Visayan-Cebu Terminal Co., Inc. vs. Commissioner of Internal Revenue, 13 SCRA 357, February 27, 1965 cannot be considered as precedent cases, hence, inapplicable to the two cases decided by this Honorable Court in the cases of Compania Maritima vs. Acting Commissioner of Internal Revenue, CTA Case No. 1426 dated November 14, 1966 and Asian Bank Corporation vs. Commissioner of Internal Revenue, CTA Case No. 4720 dated January 30, 1996, for the following reasons: In the Manila Jockey Club, Inc. case, the Club was authorized to operate horse races in which betting was made through the sale of tickets to the public. The total amount of bets called "wager fund" were distributed pursuant to Executive Order No. 320 and Republic Act No. 309, as follows: 87% as dividends to holders of winning tickets lih as "commissions" of the Manila Jockey Club, of which 1 % /2 was assigned to the Board on Races and 5% was distributed as prizes for owners of winning horses and authorized bonus for jockeys. According to the above-mentioned distribution of the "wager fund", the then Collector of Internal Revenue assessed the Club on the whole amount of its "commission" of l i/2. But since the Club had already paid the amusement tax based on its 7% share of the "commission", the amount assessable pertains only to the 5 1 2% for / the period from November 1946 to October 1950. On various instances, the Club protested the proposed assessments and was sustained by the opinions of the Secretary of

DISSENTING OPINION - CTA CASE NO. 5547 PAGES Justice rendered on three different occasions (Opinion No. 345, series of 1941; Opinion No. 249, series of 1952 and Opinion No. 340, series of 1955). Notwithstanding the opinions of the Secretary of Justice to the effect that the amount corresponding to the 51/ 2% was held only by the Club in trust for the owners of winning horses and authorized bonuses of jockeys, the then Collector of Internal Revenue demanded payment of amusement taxes for the period November 1946 to October 1950. Said demand letter was timely appealed to the Court of Appeals wherein a unanimous judgment was obtained reversing the Collector's stand on the matter. In the High Court, the position of the Secretary of Justice was sustained thereby upholding the Court of Tax Appeals' decision. Accordingly, gross receipts of the proprietor of the amusement place should not include any money which, although delivered to the amusement place was "especially earmarked" by law or legal rule and regulations for some persons other than the proprietor. Undeniably, they are money received by the racing club but they are moneys earmarked by law or regulations for winning horse owners and jockeys and never for a minute become the property of the race track. The same is true in the case of the 1 2% / which the law directs the club to deliver to the Board on Races. The High Court therefore agrees with the stand of the Court of Tax Appeals that such funds representing 51h% of the 1ih% "commissions" of the race track do not form part of the gross receipts, hence not subject to the amusement tax of 20%. The above-mentioned decision of the High Court was also applied in the case of Visayan Cebu Terminal Co., Inc. vs. Commissioner of Internal Revenue, 13 SCRA 357, Nos. L-19530 and L-19444, February 27, 1965. The legal issue involved in this

DISSENTING OPINION - CTA CASE NO. 5547 PAGE6 case is the interpretation of the management contract entered into by and between the Bureau of Customs and Visayan Cebu Terminal Co., Inc. whereby the latter as contractor was appointed the sole manager of the Arrastre Service at the Port of Cebu City. In the said Management Contract, it was further agreed and understood that in consideration of the rights and privileges granted the Contractor for the management of the Arrastre Service, the Bureau of Customs shall receive twenty eight (28%) percent of the total monthly gross income derived from whatever source in connection with the operations of the Arrastre Service, payable within ten (1 0) days of the succeeding month. The main legal issue involved in this case is whether or not the gross receipts corresponding to the 28% of the total gross income of the Service Contractor delivered to the Bureau of Customs within ten (1 0) days of the following month should form part of the gross receipts subject to 3% contractor's tax under Section 191 of the Tax Code. The Court of Tax Appeals ruled in favor of the petitioner, holding the view that the said 28% payment by the Arrastre Contractor based on its monthly gross income should not form part of the gross receipts subject to 3% contractors tax and that paragraph 23 of the said Management Contract can legally be construed as a "regulation". As the learned trial court has aptly observed: "x x x the government could not have intended to consider as gross receipts the 28% that went to one of its institutions, the Bureau of Customs, and thereby collect percentage tax on it from petitioner. To hold petitioner liable for the payment of percentage tax is unquestionably unjust and not contemplated by Section 191 ofthe Tax Code." All the above-mentioned decisions of the High Court made specific reference to gross receipts which are especially "earmarked by law or legal rule or regulation" as not

DISSENTING OPINION - CTA CASE NO. 5547 PAGE 7 forming part of the taxable gross receipts for purposes of the gross receipts tax under the Tax Code. For this purpose, it is pertinent to define the word "earmark" as a mark put upon a thing to distinguish it from another. Originally and literally, a mark upon the ear, a mode of marking sheep and other animals. Property is said to be earmarked when it can be identified or distinguished from other property of the same nature. To set apart from others (Black's Law Dictionary, 6th Edition, p. 508). In the case of the Manila Jockey Club, Inc. Executive Order No. 320 and Republic Act No. 309 made the specific "earmarking" for distribution of the total wager fund to different persons other than the proprietor. The same is true in the case of Visayan Cebu Terminal Co., Inc. where the specific earmarking of the 28% of the total monthly gross income to be delivered to the Bureau of Customs by the Contractor was provided in paragraph 23 of the Management Contract. Such specific earmarking of the twenty percent (20%) final income tax as not includible in the gross receipts for purposes of the gross receipts tax was not provided by any law or legal rule or regulations, hence the non-applicability of the above-cited High Court decisions to the Asian Bank Corporation case. This legal observation is also in point in the case of Campania Maritima case where the non-inclusion of the 10% reserve from the total cash collection to avoid claim for refund on freight and passengers tickets not taken is not provided by any law or legal rule or regulations. In the Asian Bank Corporation case, petitioner bank alleges that subjecting the gross receipts to the 20% final withholding income tax and later to the 5% gross receipts tax is not only oppressive and obnoxious but even a confiscatory form of double taxation. Double taxation has been defined "as the taxing of the same item or piece of property twice to the same person, or taxing it as the property of one person and again as the

DISSENTING OPINION- CTA CASE NO. 5547 PAG E S property of another, but this does not include the imposition of different taxes concurrently on the same property or income (e.g. federal and state income taxes), nor the taxation of the same piece of property to different persons when they hold different interests in it or when it represents different values in their hands, as when both the mortgagor and mortgagee of property are taxed in respect to their interests in it, or when a tax is laid upon the profits of the corporation and also upon the dividends paid to its stockholders" (Black's Law Dictionary, 6th Edition, p. 491). This acceptable form of double taxation is reflected in BIR Ruling No. 223 dated November 2, 1989, thus: "The 5% gross receipts tax under Section 120 of the Tax Code is collectible on all finance companies doing business in the Philippines from interests, discounts, and all other items treated as gross income under the Tax Code. Accordingly, your income derived from investing the excess funds in short-term market placements through commercial banks constitutes income hence, subject to the 5% gross receipts tax under said Section. The fact that it has been subjected to the 20% final withholding income tax under Section 50(a) is immaterial. Besides, the withholding tax is imposed under Title II of the Tax Code while the finance tax is provided under Title V thereof." (BIR Ruling No. 223, November 2, 1989) For as long as the basis for the claim for refund or tax credit certificate is based on the non-inclusion of the amount representing the final withholding income tax under Section 50(a) as part of the gross income subject to gross receipts tax, this dissenting opinion will stand. For purposes of the amusement tax under Section 260 of the Tax Code, the term ' gross receipts' embraces ' all the receipts' of the proprietor, lessee, or operator of the amusement place. The words 'all the receipts' refer to the total amount of cash received which becomes part of the funds of the taxpayer and does not include any money which has been specially earmarked by any law or legal rule or regulation for

DISSENTING OPIN ION - CTA CASE NO. 5547 PAGE9 some other person other than the proprietor, lessee or operator of the amusement place. Receipts means actually received (Philippine Long Distance Telephone Co. vs. Collector of Internal Revenue, G.R. No. L-3222, January 21, 1952) for itself and not for others, for otherwise they would not be receipts (Manila Jockey Club, Inc. vs. Collector of Internal Revenue, CTA Case No. 205, April 15, 1958; Jai Alai Corporation of the Philippines vs. Araneta, CTA Case No. 108, July 31, 1956 [Annotated, NIRC by Commissioner Jose Araiias, 1988 Edition, p. 687). WHEREFORE, in view of the foregoing, I hereby register my dissent to the majority opinion and vote for the denial of the claim fo r refund for lack oflegal basis. /